1 00:00:02,480 --> 00:00:16,360 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:18,040 --> 00:00:21,600 Speaker 2: Hello and welcome to another episode of the Odd Locks Podcast. 3 00:00:21,680 --> 00:00:24,080 Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway. 4 00:00:24,320 --> 00:00:26,600 Speaker 2: Tracy, we're back here in New York City, where it's 5 00:00:26,640 --> 00:00:30,640 Speaker 2: warm and the sun sets at a normal hour of 6 00:00:30,680 --> 00:00:33,159 Speaker 2: the day and I don't need to have blackout curtains. 7 00:00:33,200 --> 00:00:35,479 Speaker 2: But I had a really good time on our recent 8 00:00:35,840 --> 00:00:36,839 Speaker 2: voyage to Alaska. 9 00:00:36,880 --> 00:00:39,720 Speaker 3: Alaska was great. I don't know why the overall state 10 00:00:39,800 --> 00:00:41,159 Speaker 3: population has been declining. 11 00:00:41,240 --> 00:00:43,720 Speaker 2: Yeah, it's great you moved there. 12 00:00:44,440 --> 00:00:47,080 Speaker 3: There's nice weather, at least in the summer. In the summer, 13 00:00:47,240 --> 00:00:51,560 Speaker 3: beautiful scenery, as much salmon as you can fishes out 14 00:00:51,560 --> 00:00:54,160 Speaker 3: of the rivers. And every year you get paid some 15 00:00:54,200 --> 00:00:55,000 Speaker 3: money by the state. 16 00:00:55,200 --> 00:00:58,320 Speaker 2: Yeah, yeah, that's exactly right. No, there's a lot to 17 00:00:58,440 --> 00:01:00,960 Speaker 2: like about it. I think it's first type of person. 18 00:01:01,240 --> 00:01:03,400 Speaker 2: It certainly has a lot going for it. But it 19 00:01:03,440 --> 00:01:04,880 Speaker 2: was really nice. You know, I didn't really know much 20 00:01:04,920 --> 00:01:07,360 Speaker 2: about Alaska. I didn't have much fuel for its layout, 21 00:01:07,400 --> 00:01:09,560 Speaker 2: it didn't might have much feel for its geography. I 22 00:01:09,640 --> 00:01:11,600 Speaker 2: truly did feel like I was sort of at the 23 00:01:11,640 --> 00:01:15,400 Speaker 2: far western edge of the Empire out there, very very distant. 24 00:01:15,640 --> 00:01:17,880 Speaker 3: It has a very frontier feel. I mean, that's why 25 00:01:17,880 --> 00:01:19,399 Speaker 3: they call it the last frontier. 26 00:01:19,080 --> 00:01:21,319 Speaker 2: Extremely frontier field. And of course we talk to people 27 00:01:21,360 --> 00:01:23,399 Speaker 2: in all kinds of industry there, et cetera. But as 28 00:01:23,440 --> 00:01:26,480 Speaker 2: you mentioned, one thing that people know about Alaska, I mean, 29 00:01:26,520 --> 00:01:29,240 Speaker 2: people know there's oil, and also people know that there 30 00:01:29,360 --> 00:01:32,880 Speaker 2: is something that kind of resembles perhaps a sovereign wealth fund, 31 00:01:33,120 --> 00:01:35,720 Speaker 2: and also that every citizen over I think the age 32 00:01:35,720 --> 00:01:38,280 Speaker 2: of like eighteen months or whatever, ten months or something 33 00:01:38,360 --> 00:01:40,920 Speaker 2: gets a check from the state, which sounds pretty nice. 34 00:01:40,959 --> 00:01:44,440 Speaker 3: It sounds nice. It also sounds like a loaded political 35 00:01:44,440 --> 00:01:47,800 Speaker 3: and financial hot potato, right, and I can imagine every 36 00:01:47,880 --> 00:01:50,520 Speaker 3: year there is probably lots and lots of debate about 37 00:01:50,560 --> 00:01:52,760 Speaker 3: exactly how much is going to be dispersed, what it 38 00:01:52,800 --> 00:01:55,280 Speaker 3: means for the future of the fund, how it interacts 39 00:01:55,280 --> 00:01:58,760 Speaker 3: with state and federal funding. Yeah, I'm excited to talk 40 00:01:58,800 --> 00:02:00,920 Speaker 3: about all of that, but I think we should also 41 00:02:00,960 --> 00:02:04,480 Speaker 3: add that this has new relevance right to the wider 42 00:02:05,000 --> 00:02:07,880 Speaker 3: United States in America because there is talk about starting 43 00:02:07,960 --> 00:02:11,359 Speaker 3: a US sovereign wealth fund, and there is also the 44 00:02:11,480 --> 00:02:14,480 Speaker 3: payments for kids for infants from the Trump administration. 45 00:02:14,639 --> 00:02:17,320 Speaker 2: That's right, that's right. Whether anything at the federal level 46 00:02:17,360 --> 00:02:19,880 Speaker 2: that resembles a sovereign Well's fund or any sort of fund. 47 00:02:19,919 --> 00:02:23,600 Speaker 2: What actually happened, who knows, But we have certain models 48 00:02:23,639 --> 00:02:25,520 Speaker 2: of all this stuff, and it's worth learning a little 49 00:02:25,520 --> 00:02:27,640 Speaker 2: bit more how they work. And I do think to 50 00:02:27,720 --> 00:02:31,560 Speaker 2: sort of conclude our intellectual journey and our literal journey 51 00:02:31,560 --> 00:02:33,480 Speaker 2: to Alaska, we sort of have to touch. 52 00:02:33,320 --> 00:02:33,880 Speaker 4: On this element. 53 00:02:33,960 --> 00:02:34,960 Speaker 3: Absolutely, let's do it. 54 00:02:35,000 --> 00:02:37,000 Speaker 2: Okay, Well, I'm really excited to say we literally have 55 00:02:37,160 --> 00:02:40,760 Speaker 2: the two perfect guests to talk about the Alaska Permanent 56 00:02:40,800 --> 00:02:42,280 Speaker 2: Fund and what it is. We're going to be speaking 57 00:02:42,280 --> 00:02:44,919 Speaker 2: with Marcus Frampton, he is the CIO of the Alaska 58 00:02:44,919 --> 00:02:49,080 Speaker 2: Permanent Fund, and Devin Mitchell, CEO of the Alaska Permanent Fund. 59 00:02:49,160 --> 00:02:51,360 Speaker 2: So Marcus and Devin, thank you so much both for 60 00:02:51,440 --> 00:02:53,040 Speaker 2: coming on the Odd Lass Podcast. 61 00:02:53,440 --> 00:02:55,040 Speaker 4: Yeah, thank you. We're happy to be here. 62 00:02:55,880 --> 00:02:58,880 Speaker 2: Why don't we start with maybe one of you could 63 00:02:58,960 --> 00:03:01,639 Speaker 2: just give us the very clicked like what is the 64 00:03:01,680 --> 00:03:04,600 Speaker 2: size of the fund and how, when and why was 65 00:03:04,639 --> 00:03:05,200 Speaker 2: it started? 66 00:03:06,360 --> 00:03:10,120 Speaker 5: So this is Devin Mitchell and I'll take that question. 67 00:03:10,800 --> 00:03:12,679 Speaker 5: When you think about Alaska, and you guys have a 68 00:03:13,080 --> 00:03:16,200 Speaker 5: just a small sample of Alaska, of course, when you 69 00:03:16,240 --> 00:03:18,919 Speaker 5: think about it. You went to the largest city in Alaska, 70 00:03:18,960 --> 00:03:22,320 Speaker 5: but if you superimposed Alaska over the continental US, you 71 00:03:22,360 --> 00:03:25,880 Speaker 5: would have each of the coasts touched by Alaska, as 72 00:03:25,880 --> 00:03:28,359 Speaker 5: well as the southern and northern borders. 73 00:03:28,800 --> 00:03:29,760 Speaker 6: So it's a huge state. 74 00:03:29,840 --> 00:03:33,080 Speaker 5: Let's say you went to Nebraska, so you didn't really 75 00:03:33,400 --> 00:03:36,320 Speaker 5: experience all that Alaska has to offer, but certainly it 76 00:03:36,320 --> 00:03:39,160 Speaker 5: sounds like you got a good sample. The state's a 77 00:03:39,240 --> 00:03:42,320 Speaker 5: young state. We became a state in nineteen fifty nine, 78 00:03:42,680 --> 00:03:44,920 Speaker 5: and when Alaska became a state, there was a lot 79 00:03:44,920 --> 00:03:47,960 Speaker 5: of concern about the ability of Alaska to support itself 80 00:03:48,040 --> 00:03:52,600 Speaker 5: economically because of a relatively small population, remote location, lack 81 00:03:52,600 --> 00:03:55,720 Speaker 5: of understanding about the state. And so the state was 82 00:03:55,760 --> 00:03:59,520 Speaker 5: created as a resource state, meaning that the state retained 83 00:03:59,560 --> 00:04:02,880 Speaker 5: the right the sub service mineral rights of the land 84 00:04:02,920 --> 00:04:07,040 Speaker 5: in Alaska that it selected at statehood. And so in 85 00:04:07,160 --> 00:04:11,440 Speaker 5: nineteen sixty eight, Prudo Bay was discovered, the largest oil 86 00:04:11,480 --> 00:04:15,440 Speaker 5: field in North America, and the next year, in nineteen 87 00:04:15,520 --> 00:04:18,000 Speaker 5: sixty nine, there was a lease sale that generated nine 88 00:04:18,080 --> 00:04:20,640 Speaker 5: hundred million dollars of revenue. 89 00:04:20,200 --> 00:04:20,760 Speaker 6: For the state. 90 00:04:20,880 --> 00:04:22,680 Speaker 5: And this is at a time when the state's budget 91 00:04:22,680 --> 00:04:24,760 Speaker 5: was one hundred and fifty million dollars and so an 92 00:04:24,800 --> 00:04:27,880 Speaker 5: incredible amount of money for the day for this state. 93 00:04:28,040 --> 00:04:30,880 Speaker 5: People thought it was so much money they couldn't possibly 94 00:04:30,960 --> 00:04:34,440 Speaker 5: spend it all. It initiated a process that resulted in 95 00:04:34,440 --> 00:04:38,600 Speaker 5: the Trans Alaska Pipeline being constructed, but by the mid 96 00:04:38,720 --> 00:04:43,080 Speaker 5: nineteen seventies, that money was clearly going to be finally 97 00:04:43,120 --> 00:04:47,279 Speaker 5: expended before the Trans Alaska Pipeline was completed, and that 98 00:04:47,400 --> 00:04:50,320 Speaker 5: set the stage for people to recognize that oil was 99 00:04:50,320 --> 00:04:54,839 Speaker 5: a one time, finite resource and a revenue generator, and 100 00:04:55,240 --> 00:04:59,039 Speaker 5: there were forward thinking people of that generation that were 101 00:04:59,040 --> 00:05:01,360 Speaker 5: willing to set aside I had a portion of their 102 00:05:01,440 --> 00:05:05,760 Speaker 5: current year revenue for the benefit of future generations of Alaskans, 103 00:05:06,080 --> 00:05:11,039 Speaker 5: and that culminated with a constitutional amendment in nineteen seventy 104 00:05:11,080 --> 00:05:16,080 Speaker 5: six that dedicated twenty five percent of royalty revenues to 105 00:05:16,120 --> 00:05:20,560 Speaker 5: the State of Alaska. It required that that revenue, once saved, 106 00:05:20,640 --> 00:05:24,640 Speaker 5: be invested, and it required that the earnings of the 107 00:05:24,760 --> 00:05:29,200 Speaker 5: fund be made available to the state. And so we've 108 00:05:29,960 --> 00:05:34,760 Speaker 5: subsequently initiated the Permanent Fund Dividend program to allow residents 109 00:05:34,760 --> 00:05:37,520 Speaker 5: to have a stake in the program, and it's evolved 110 00:05:37,520 --> 00:05:40,320 Speaker 5: today to where it's our largest single revenue source at 111 00:05:40,680 --> 00:05:43,240 Speaker 5: approximately sixty percent of the state's revenue. 112 00:05:43,720 --> 00:05:46,800 Speaker 3: Yeah, that's a that's a hefty chunk. Marcus, Why don't 113 00:05:46,800 --> 00:05:50,560 Speaker 3: you give us from the sort of portfolios downpoint talk 114 00:05:50,640 --> 00:05:53,880 Speaker 3: to us about how the fund has evolved over time. 115 00:05:53,920 --> 00:05:56,360 Speaker 3: So nineteen seventy six, you know, it gets set up. 116 00:05:56,600 --> 00:05:59,000 Speaker 3: What do the initial investments look like, and what do 117 00:05:59,040 --> 00:05:59,839 Speaker 3: they look like today? 118 00:06:00,920 --> 00:06:01,200 Speaker 4: Yeah? 119 00:06:01,240 --> 00:06:04,440 Speaker 7: Sure, So this is Marcus Frampton. I'm the chief investment officer. 120 00:06:04,960 --> 00:06:07,240 Speaker 7: Initially when the fund was set up, we were in 121 00:06:07,279 --> 00:06:09,480 Speaker 7: a very high interest rate environment. At the end of 122 00:06:09,520 --> 00:06:12,440 Speaker 7: the seventies, equities had kind of fallen out of favor, 123 00:06:12,600 --> 00:06:14,840 Speaker 7: and so it was very much a fixed income fund 124 00:06:15,440 --> 00:06:18,919 Speaker 7: up until the mid nineteen eighties. Real estate was introduced 125 00:06:18,920 --> 00:06:22,240 Speaker 7: at that point as the second asset class. In the 126 00:06:22,279 --> 00:06:25,479 Speaker 7: early nineties, first domestic stocks and then later in the 127 00:06:25,480 --> 00:06:29,880 Speaker 7: mid nineties, international stocks were added. In the early two thousands, 128 00:06:30,000 --> 00:06:33,600 Speaker 7: we added hedge funds and private credit and private equity 129 00:06:34,200 --> 00:06:38,839 Speaker 7: and have grown those alternative asset classes. Like many of 130 00:06:38,880 --> 00:06:42,680 Speaker 7: our peers, the university endowments and pensions have grown, so 131 00:06:42,720 --> 00:06:46,400 Speaker 7: today the fund itself is around eighty five billion dollars. 132 00:06:46,880 --> 00:06:51,120 Speaker 7: Our largest asset classes is public equities. That money's managed 133 00:06:51,200 --> 00:06:54,520 Speaker 7: against the all country world index, so very global index. 134 00:06:55,080 --> 00:06:59,039 Speaker 7: We'd trade bonds internally high yield through investment grade, and 135 00:06:59,080 --> 00:07:01,760 Speaker 7: then have alternative and privates that are kind of forty 136 00:07:01,839 --> 00:07:06,000 Speaker 7: percent of the fund today. So our asset allocation is 137 00:07:06,040 --> 00:07:10,480 Speaker 7: not unlike you know, many university endowments or pension funds today. 138 00:07:10,640 --> 00:07:14,640 Speaker 7: And we manage to an inflation plus five percent return 139 00:07:15,320 --> 00:07:19,440 Speaker 7: with the aim of dispersing roughly five percent of the 140 00:07:19,440 --> 00:07:22,720 Speaker 7: fund to the state both for state spending and the 141 00:07:22,760 --> 00:07:27,240 Speaker 7: dividend program, and then having the remainder maintain its value 142 00:07:27,240 --> 00:07:27,840 Speaker 7: with inflation. 143 00:07:28,040 --> 00:07:30,360 Speaker 4: Is why we target that inflation plus five. 144 00:07:31,560 --> 00:07:35,040 Speaker 2: I'm curious. You know, markets are markets, and sometimes as 145 00:07:35,240 --> 00:07:39,760 Speaker 2: valuations go down any year, what happens then for either 146 00:07:39,800 --> 00:07:43,119 Speaker 2: the fund or Alaska when there's a bad year. Maybe 147 00:07:43,120 --> 00:07:45,760 Speaker 2: it's like twenty twenty two and stocks have a pretty 148 00:07:45,840 --> 00:07:47,679 Speaker 2: rough year, or two thousand and eight and two thousand 149 00:07:47,720 --> 00:07:50,160 Speaker 2: and nine and stocks have a rough year. What happens 150 00:07:50,400 --> 00:07:55,280 Speaker 2: when you can't satisfy the demand for state revenue or 151 00:07:55,640 --> 00:07:58,560 Speaker 2: you know, I guess partly those dividends. What happens both 152 00:07:58,600 --> 00:08:00,480 Speaker 2: with the fund in terms of how and how this 153 00:08:00,520 --> 00:08:01,360 Speaker 2: state budget works. 154 00:08:02,400 --> 00:08:04,600 Speaker 7: Yeah, well, at a high level, we've got a very 155 00:08:04,640 --> 00:08:08,720 Speaker 7: complicated system with the constantually protected principle and then an 156 00:08:08,720 --> 00:08:13,440 Speaker 7: earnings reserve that accumulates realized earnings. And so at the 157 00:08:13,520 --> 00:08:17,000 Speaker 7: investment level, we're rebalancing, we're buying stocks and doing all 158 00:08:17,040 --> 00:08:18,880 Speaker 7: the things all investors do. But I'll hand it to 159 00:08:18,920 --> 00:08:21,840 Speaker 7: Devin on how we think about the pressure on the 160 00:08:21,880 --> 00:08:23,520 Speaker 7: earnings reserve in those situations. 161 00:08:24,440 --> 00:08:29,160 Speaker 5: Sure, So, as I said earlier, the Constitution was pretty 162 00:08:29,160 --> 00:08:31,400 Speaker 5: broad in how it established the fund, and then there's 163 00:08:31,440 --> 00:08:34,760 Speaker 5: a statutory overlay on top of that, and the statutory 164 00:08:34,880 --> 00:08:40,240 Speaker 5: overlay defines earnings or revenue that's available to appropriate as 165 00:08:40,440 --> 00:08:45,920 Speaker 5: realized income. And so when we have unrealized income, we 166 00:08:46,040 --> 00:08:49,319 Speaker 5: hold it in either principle or what we call the 167 00:08:49,360 --> 00:08:53,800 Speaker 5: earnings reserve account. That's where we hold the realized earnings 168 00:08:53,800 --> 00:08:58,040 Speaker 5: of the fund and a pro rata allocation of unrealized earnings. 169 00:08:58,520 --> 00:09:01,120 Speaker 5: So when you break down that eighty five billion that 170 00:09:01,240 --> 00:09:04,959 Speaker 5: Marcus referred to earlier, you have about fifty nine billion 171 00:09:05,000 --> 00:09:09,040 Speaker 5: that's actually protected principle of the permanent Fund. Then you 172 00:09:09,200 --> 00:09:15,000 Speaker 5: have about thirteen billion of unrealized gains allocated to principle, 173 00:09:15,280 --> 00:09:17,360 Speaker 5: and then you have the earnings Reserve Account, which is 174 00:09:17,400 --> 00:09:20,480 Speaker 5: the portion that the legislature can appropriate out of it 175 00:09:20,559 --> 00:09:24,800 Speaker 5: has about six point four billion that's available for appropriation 176 00:09:25,000 --> 00:09:27,240 Speaker 5: at this point, has about two point three billion of 177 00:09:27,320 --> 00:09:32,640 Speaker 5: unrealized gains that are allocated towards it, and then that combined. 178 00:09:32,200 --> 00:09:33,840 Speaker 6: Is around nine billion dollars. 179 00:09:34,080 --> 00:09:36,240 Speaker 5: And then we have the current years POMB and our 180 00:09:36,280 --> 00:09:39,679 Speaker 5: POMV structure has only been in place since twenty nineteen. 181 00:09:40,080 --> 00:09:44,119 Speaker 5: It's a historical five year average five percent draw structure 182 00:09:44,640 --> 00:09:47,320 Speaker 5: and has, like I said, been providing the majority of 183 00:09:47,320 --> 00:09:50,200 Speaker 5: state revenue since. But prior to that, the only thing 184 00:09:50,240 --> 00:09:53,720 Speaker 5: funded out of the permanent fund were Permanent Fund dividends. 185 00:09:53,760 --> 00:09:56,520 Speaker 5: So that was a big shift timeframe that we've gone 186 00:09:56,559 --> 00:09:59,560 Speaker 5: through in the last six or seven years. As far 187 00:09:59,600 --> 00:10:03,559 Speaker 5: as what we would do in a negative earnings year, 188 00:10:03,640 --> 00:10:07,560 Speaker 5: if we had unrealized losses, it would just diminish that 189 00:10:08,160 --> 00:10:10,800 Speaker 5: war chest of unrealized gains we currently have. 190 00:10:11,360 --> 00:10:12,199 Speaker 6: If it were to. 191 00:10:12,400 --> 00:10:16,720 Speaker 5: Erode beyond that level, then you would be in a 192 00:10:16,760 --> 00:10:21,400 Speaker 5: situation at some point where the earnings Reserve Account would 193 00:10:21,440 --> 00:10:25,040 Speaker 5: be deficient and there wouldn't be an ability to provide 194 00:10:25,160 --> 00:10:28,040 Speaker 5: for a transfer to the state of Alaska, and that 195 00:10:28,200 --> 00:10:31,000 Speaker 5: in part is why we've been advocating at the fund, 196 00:10:31,520 --> 00:10:37,640 Speaker 5: based on our trustees direction, to evolve the fund from 197 00:10:37,679 --> 00:10:41,760 Speaker 5: this historical model created fifty years ago to something that's 198 00:10:41,800 --> 00:10:44,280 Speaker 5: a little more modern and a little more in line 199 00:10:44,320 --> 00:10:49,080 Speaker 5: with a true endowment or sovereign wealth fund and recognize 200 00:10:49,120 --> 00:10:52,200 Speaker 5: the importance to the state's annual revenue stream that it 201 00:10:52,240 --> 00:10:53,280 Speaker 5: now represents. 202 00:10:53,840 --> 00:10:57,360 Speaker 3: So in a year like twenty twenty five, if Joe 203 00:10:57,440 --> 00:11:00,160 Speaker 3: and I were flies in the room when you were 204 00:11:00,200 --> 00:11:03,680 Speaker 3: maybe actually mosquitos in the room, given that it's Alaska, 205 00:11:04,120 --> 00:11:05,640 Speaker 3: if we were in the room when you were making 206 00:11:05,640 --> 00:11:09,240 Speaker 3: the decision about what this year's dividend payout is actually 207 00:11:09,240 --> 00:11:12,720 Speaker 3: going to be, what would the conversations actually sound like. 208 00:11:12,800 --> 00:11:16,560 Speaker 3: What are the considerations that you were thinking about as 209 00:11:16,559 --> 00:11:17,680 Speaker 3: you announce this number. 210 00:11:18,480 --> 00:11:20,880 Speaker 6: So, first of all, we're not those flies. 211 00:11:21,080 --> 00:11:24,120 Speaker 5: We don't decide how big the permanent fund dividend is 212 00:11:24,160 --> 00:11:27,160 Speaker 5: going to be. We just earn and provide the annual 213 00:11:27,200 --> 00:11:32,680 Speaker 5: transfer to the state. The policymakers that decide how much 214 00:11:32,760 --> 00:11:35,000 Speaker 5: the dividend is going to be, or the legislature and 215 00:11:35,040 --> 00:11:38,640 Speaker 5: the governor. So in twenty nineteen, when they created the 216 00:11:38,800 --> 00:11:41,280 Speaker 5: percent of market value statutory structure. 217 00:11:41,320 --> 00:11:42,040 Speaker 6: They left in. 218 00:11:42,040 --> 00:11:47,400 Speaker 5: Place the historic, the historical or legacy Permanent Fund Dividend statute, 219 00:11:47,480 --> 00:11:51,200 Speaker 5: which was in earnings model. It was twenty one percent 220 00:11:51,280 --> 00:11:54,439 Speaker 5: of the last five completed fiscal years earnings. You take that, 221 00:11:54,520 --> 00:11:57,640 Speaker 5: you split it in half. Half goes to the Permanent 222 00:11:57,640 --> 00:12:00,840 Speaker 5: Fund dividend. Half goes theoretically of the state, although the 223 00:12:00,840 --> 00:12:03,800 Speaker 5: state always just put their half back into the fund, 224 00:12:04,280 --> 00:12:07,160 Speaker 5: and so our governor has proposed each year of his 225 00:12:07,240 --> 00:12:12,600 Speaker 5: administration that that formula be followed for purposes of establishing 226 00:12:12,679 --> 00:12:16,400 Speaker 5: the permanent Fund dividend. The difficulty has been that oil 227 00:12:16,480 --> 00:12:19,959 Speaker 5: revenues have diminished for the State of Alaska. They're no 228 00:12:20,000 --> 00:12:24,920 Speaker 5: longer robust enough to provide for the services that residents expect, 229 00:12:25,080 --> 00:12:27,640 Speaker 5: and so the legislature has gone through a process of 230 00:12:27,679 --> 00:12:32,720 Speaker 5: determining how much can they provide for a permanent fund 231 00:12:32,760 --> 00:12:35,360 Speaker 5: dividend at the same time they provide some level of 232 00:12:35,400 --> 00:12:38,640 Speaker 5: services that the residents expect, and as you might be 233 00:12:38,679 --> 00:12:41,920 Speaker 5: able to predict, during an election year, miraculously they find 234 00:12:41,960 --> 00:12:44,800 Speaker 5: ways to have a little bit larger permanent fund and 235 00:12:44,880 --> 00:12:47,559 Speaker 5: during non election years maybe they're a little more austere. 236 00:12:47,679 --> 00:12:50,400 Speaker 5: But it's been a struggle in a more of a 237 00:12:50,520 --> 00:12:52,680 Speaker 5: debate these last six years. 238 00:12:52,920 --> 00:12:55,240 Speaker 2: Yeah, Aly, can you talk about that a little bit 239 00:12:55,280 --> 00:12:57,840 Speaker 2: more from your perspective of thinking about the long term 240 00:12:57,880 --> 00:13:00,000 Speaker 2: health of the State of Alaska, the long term health 241 00:13:00,040 --> 00:13:03,520 Speaker 2: of the fund and so forth, How can either political 242 00:13:03,760 --> 00:13:07,120 Speaker 2: elected leaders or people such as yourself whose job is 243 00:13:07,120 --> 00:13:09,240 Speaker 2: to safeguard the fund for the long term, for the 244 00:13:09,280 --> 00:13:12,960 Speaker 2: benefit of the state of Alaska, you know, avoid essentially 245 00:13:13,520 --> 00:13:15,960 Speaker 2: people eating the seed corn, right, because that's what we're 246 00:13:15,960 --> 00:13:19,319 Speaker 2: talking about. Right of course, in an election year, everyone 247 00:13:19,720 --> 00:13:22,760 Speaker 2: Democrat or Republican is going to be about protecting or 248 00:13:22,800 --> 00:13:25,840 Speaker 2: expanding the dividend, regardless of the performance, regardless of how 249 00:13:25,880 --> 00:13:29,120 Speaker 2: big oil royalties are. How do you sort of keep 250 00:13:29,240 --> 00:13:31,240 Speaker 2: you know, I think there's versions of this debate that 251 00:13:31,240 --> 00:13:34,440 Speaker 2: happened in DC. What is the discussions like to keep 252 00:13:34,480 --> 00:13:40,160 Speaker 2: those choices essentially fiscally responsible for the long term. 253 00:13:40,320 --> 00:13:45,280 Speaker 5: I think the discipline that's required in any financial system 254 00:13:45,520 --> 00:13:48,880 Speaker 5: is something that we circle around to continually that in 255 00:13:48,960 --> 00:13:54,200 Speaker 5: the event that you exceed what we've determined to the 256 00:13:54,240 --> 00:13:57,400 Speaker 5: best degree possible as a reasonable draw. The five percent 257 00:13:57,559 --> 00:14:00,960 Speaker 5: historical draw is a reasonable draw if you want to 258 00:14:01,040 --> 00:14:03,400 Speaker 5: ensure that you have an inflation proof fund into the 259 00:14:03,440 --> 00:14:07,360 Speaker 5: future that to the extent you deviate from that, because 260 00:14:07,400 --> 00:14:10,720 Speaker 5: there's available money in the stats, in the earnings reserve account. 261 00:14:11,120 --> 00:14:12,880 Speaker 6: That's just the first time that. 262 00:14:12,840 --> 00:14:15,360 Speaker 5: You're going to overspend, and next year there's going to 263 00:14:15,400 --> 00:14:18,600 Speaker 5: be another reason that you overspend, and you're almost ensuring 264 00:14:18,679 --> 00:14:22,600 Speaker 5: that the system's going to fail. And I circle around 265 00:14:22,600 --> 00:14:26,360 Speaker 5: to why does this money even exist. It exists because 266 00:14:26,760 --> 00:14:31,120 Speaker 5: there were fifty generations of Alaskans before this generation that 267 00:14:31,240 --> 00:14:33,880 Speaker 5: didn't spend all of the current year revenue that came in. 268 00:14:34,000 --> 00:14:36,600 Speaker 5: They put some of that revenue aside, and they didn't 269 00:14:36,640 --> 00:14:39,880 Speaker 5: do that for the benefit of any individual that was 270 00:14:39,920 --> 00:14:41,800 Speaker 5: going to live in the state of Alaska in twenty 271 00:14:41,880 --> 00:14:44,480 Speaker 5: twenty five or twenty twenty six. They did it for 272 00:14:44,600 --> 00:14:47,240 Speaker 5: the state of Alaska so the state of Alaska would 273 00:14:47,240 --> 00:14:50,240 Speaker 5: have the resources to survive into the future. And so 274 00:14:50,360 --> 00:14:54,000 Speaker 5: that sacrifice of the past generations of Alaskans to ensure 275 00:14:54,000 --> 00:14:57,760 Speaker 5: that we have this incredible resource and revenue source for 276 00:14:57,840 --> 00:15:02,680 Speaker 5: the state to provide for not just services. Remember we're 277 00:15:02,720 --> 00:15:06,920 Speaker 5: not just arguing about school funding and public safety and 278 00:15:07,080 --> 00:15:10,040 Speaker 5: roads and the normal things. We're arguing about how much 279 00:15:10,080 --> 00:15:14,640 Speaker 5: money to give away that to our residents. That's such 280 00:15:14,680 --> 00:15:17,760 Speaker 5: an incredible gift that the past generations have given to 281 00:15:17,840 --> 00:15:21,760 Speaker 5: this generation, and that same gift needs to be enshrined 282 00:15:21,840 --> 00:15:23,160 Speaker 5: for the future of the state. 283 00:15:39,000 --> 00:15:42,800 Speaker 3: Marcus, How does declining oil revenue or just the cyclicality 284 00:15:42,880 --> 00:15:46,640 Speaker 3: of the oil business feed into your actual investment decisions? 285 00:15:46,680 --> 00:15:49,400 Speaker 3: You know, if the price of crude goes down, is 286 00:15:49,440 --> 00:15:52,840 Speaker 3: that a year where maybe you invest in risky, er, 287 00:15:53,040 --> 00:15:55,920 Speaker 3: higher yielding things. Do you calibrate it in that way? 288 00:15:57,200 --> 00:15:57,680 Speaker 4: Yeah? Sure. 289 00:15:57,720 --> 00:16:02,280 Speaker 7: So today the royalty income for the fund is less 290 00:16:02,280 --> 00:16:05,000 Speaker 7: than a billion a year, and we're dispersing over three 291 00:16:05,080 --> 00:16:07,840 Speaker 7: billion a year to the state through the five percent 292 00:16:07,920 --> 00:16:12,320 Speaker 7: draw So movements in oil do impact our inflows, but 293 00:16:12,560 --> 00:16:15,320 Speaker 7: very marginally relative to the size of the fund. And 294 00:16:16,040 --> 00:16:18,600 Speaker 7: there have been arguments at times whether we should invest 295 00:16:18,640 --> 00:16:21,680 Speaker 7: in oil and gas given the state's exposure, and we've 296 00:16:21,760 --> 00:16:24,200 Speaker 7: ended up deciding that we do want exposure to oil 297 00:16:24,200 --> 00:16:27,400 Speaker 7: and gas investments, and so in periods like twenty twenty 298 00:16:27,440 --> 00:16:30,560 Speaker 7: and twenty twenty one have leaned into energy, private equity 299 00:16:30,960 --> 00:16:33,560 Speaker 7: and things like that. So we like investing in energy, 300 00:16:33,640 --> 00:16:37,640 Speaker 7: but it doesn't have an outsized impact on the cash 301 00:16:37,680 --> 00:16:38,600 Speaker 7: flows of the fund. 302 00:16:38,800 --> 00:16:40,200 Speaker 4: Given the size of the royalties. 303 00:16:40,280 --> 00:16:42,200 Speaker 2: I'm actually really intrigued by that. Can you talk more 304 00:16:42,240 --> 00:16:44,400 Speaker 2: about that, because I remember sometimes you hear about these 305 00:16:44,480 --> 00:16:49,320 Speaker 2: questions should people in finance have exposure to fund banks 306 00:16:49,400 --> 00:16:51,480 Speaker 2: right in their portfolio? There's a good reason to say no, 307 00:16:51,640 --> 00:16:54,800 Speaker 2: because their career is going to be levered to the 308 00:16:54,840 --> 00:16:57,920 Speaker 2: cycle of the financial cycle, and if they get laid off, 309 00:16:57,920 --> 00:16:59,560 Speaker 2: it's probably going to be at a time when bank 310 00:16:59,560 --> 00:17:02,400 Speaker 2: stocks low and so forth. So that's actually a very 311 00:17:02,400 --> 00:17:04,639 Speaker 2: interesting dimension. Can you talk a little bit more about 312 00:17:04,880 --> 00:17:07,639 Speaker 2: the reasoning for this sort of in a way double 313 00:17:07,720 --> 00:17:10,520 Speaker 2: exposure to energy that the fund has. 314 00:17:10,880 --> 00:17:13,800 Speaker 7: Yeah, I mean, we feel like energy is an attractive area, 315 00:17:13,920 --> 00:17:17,240 Speaker 7: so many investors don't want to be in fossil fuels 316 00:17:17,280 --> 00:17:20,719 Speaker 7: that even today, I mean in twenty twenty one, there 317 00:17:20,760 --> 00:17:24,640 Speaker 7: was a clear scarcity of capital and there were comments 318 00:17:24,640 --> 00:17:27,679 Speaker 7: being made that people weren't me using fossil fuels in 319 00:17:27,720 --> 00:17:31,119 Speaker 7: ten years, which like clearly in our opinion, contradicted the data. 320 00:17:31,280 --> 00:17:35,240 Speaker 4: So we just liked it from an opportunistic standpoint. 321 00:17:35,640 --> 00:17:38,160 Speaker 7: I mean, I think that it's a small enough portion 322 00:17:38,280 --> 00:17:41,000 Speaker 7: of the S and P five hundred and our private 323 00:17:41,000 --> 00:17:44,920 Speaker 7: equity benchmark that you know, if the index is at 324 00:17:45,200 --> 00:17:46,879 Speaker 7: four percent and we're at five. 325 00:17:47,000 --> 00:17:48,760 Speaker 4: It's it's not like an outsized impact. 326 00:17:48,800 --> 00:17:51,399 Speaker 7: I mean, you see tech people that work at Google 327 00:17:51,440 --> 00:17:54,919 Speaker 7: and their whole portfolios and tech and I would advise 328 00:17:54,960 --> 00:17:58,280 Speaker 7: against that, but I think our sizing is reasonable. 329 00:17:58,200 --> 00:18:00,879 Speaker 4: And we like the outlook for Weill and gas, so 330 00:18:00,960 --> 00:18:01,800 Speaker 4: we're active there. 331 00:18:02,640 --> 00:18:04,800 Speaker 5: Just to give you an idea of the magnitude of 332 00:18:04,840 --> 00:18:07,639 Speaker 5: the royalties that are coming to the fund at this point, 333 00:18:07,840 --> 00:18:10,600 Speaker 5: the high and the low over the last ten years 334 00:18:10,640 --> 00:18:14,000 Speaker 5: are only two hundred million dollars apart, three hundred fifteen 335 00:18:14,119 --> 00:18:17,440 Speaker 5: ish for the low and five forty ish for the high, 336 00:18:17,760 --> 00:18:21,840 Speaker 5: and so in comparison to revenues and investments of the fund, 337 00:18:21,880 --> 00:18:24,160 Speaker 5: fairly inconsequential. 338 00:18:24,400 --> 00:18:27,760 Speaker 3: Other than generating a return and being able to fund 339 00:18:27,800 --> 00:18:30,760 Speaker 3: the state and pay out a nice bonus to citizens, 340 00:18:30,800 --> 00:18:33,399 Speaker 3: which you know in itself are two big things to 341 00:18:33,400 --> 00:18:36,560 Speaker 3: be doing. Are there any other goals that you have 342 00:18:36,640 --> 00:18:39,080 Speaker 3: in terms of investment. Are you trying to build out 343 00:18:39,119 --> 00:18:42,680 Speaker 3: more infrastructure in Alaska? Are you conscious of the specific 344 00:18:42,920 --> 00:18:44,240 Speaker 3: projects that you're funding. 345 00:18:45,160 --> 00:18:48,560 Speaker 7: We invest entirely with a financial lens, and that was 346 00:18:49,280 --> 00:18:51,720 Speaker 7: with the exception of one. There's one state law that 347 00:18:51,800 --> 00:18:55,159 Speaker 7: says if we're in our rags that say that if 348 00:18:55,200 --> 00:18:58,680 Speaker 7: there's an investment of equivalent risk and return, we should 349 00:18:58,680 --> 00:19:03,000 Speaker 7: prefer the Alaskan investment. And it's very difficult to measure that. Like, 350 00:19:03,040 --> 00:19:04,800 Speaker 7: if you look at the stock market, I think there's 351 00:19:05,280 --> 00:19:09,040 Speaker 7: one stock Northern Bank that's an Alaskan based stock on 352 00:19:09,119 --> 00:19:12,960 Speaker 7: an exchange. So a strict interpretation would be that we 353 00:19:12,960 --> 00:19:16,440 Speaker 7: have to like compare Northern Bank to every community bank. 354 00:19:16,800 --> 00:19:18,200 Speaker 4: And I like Northern. 355 00:19:17,800 --> 00:19:19,960 Speaker 7: Bank, and like we own stock at Northern Bank, but 356 00:19:20,119 --> 00:19:21,639 Speaker 7: there's a limit to how much you can have in 357 00:19:21,640 --> 00:19:24,399 Speaker 7: a three hundred million market cap community bank. 358 00:19:24,800 --> 00:19:27,080 Speaker 2: And so pretty well, I just pulled up the church. 359 00:19:27,119 --> 00:19:29,960 Speaker 2: It's a pretty success. Just a small little bank, but 360 00:19:30,000 --> 00:19:32,199 Speaker 2: it looks like this. It's a nice yeah, and I have. 361 00:19:32,200 --> 00:19:34,840 Speaker 4: An account there. I like Northern Bank. But so none 362 00:19:34,880 --> 00:19:37,000 Speaker 4: of this is meant to denigrate Northern Bank. We love 363 00:19:37,240 --> 00:19:37,840 Speaker 4: Northern Bank. 364 00:19:37,920 --> 00:19:43,400 Speaker 7: But so when there are opportunities in Alaska, we will 365 00:19:43,440 --> 00:19:46,119 Speaker 7: take a look, probably more frequently than we would if 366 00:19:46,160 --> 00:19:48,840 Speaker 7: it's a random opportunity in another state. But our mandate 367 00:19:48,920 --> 00:19:52,600 Speaker 7: is very much highest and best return financially, and some 368 00:19:52,680 --> 00:19:55,320 Speaker 7: of our private equity managers have done deals in the state, 369 00:19:55,400 --> 00:19:58,920 Speaker 7: and we have some minor investment activity in the state, 370 00:19:58,960 --> 00:20:02,000 Speaker 7: but that's the overall look that we take. 371 00:20:03,000 --> 00:20:06,320 Speaker 5: And again it goes back to the development fund model 372 00:20:06,480 --> 00:20:09,760 Speaker 5: versus a public trust model, and that was the debate 373 00:20:09,800 --> 00:20:13,119 Speaker 5: that happened in the nineteen seventies, from seventy six to 374 00:20:13,200 --> 00:20:17,480 Speaker 5: nineteen eighty, and the public trust model one, rather than 375 00:20:17,680 --> 00:20:20,600 Speaker 5: we're going to try to invest this money in Alaska 376 00:20:20,640 --> 00:20:25,399 Speaker 5: and develop Alaska. Alberta Heritage Fund is actually a good 377 00:20:25,880 --> 00:20:29,000 Speaker 5: proxy for how you might expect a fund to have 378 00:20:29,240 --> 00:20:33,239 Speaker 5: performed if it were a development model. And when you 379 00:20:33,320 --> 00:20:37,760 Speaker 5: compare the performance of their fund relative to ours, it 380 00:20:37,920 --> 00:20:42,520 Speaker 5: certainly financially has worked out to Alaska's benefit to have 381 00:20:42,640 --> 00:20:45,560 Speaker 5: the public trust and just looking for the best investment, 382 00:20:45,560 --> 00:20:46,640 Speaker 5: as Marcus described. 383 00:20:47,400 --> 00:20:50,439 Speaker 2: Marcus, while we have you here, can you tell us 384 00:20:50,440 --> 00:20:52,800 Speaker 2: a little bit about your sense of the state of 385 00:20:52,840 --> 00:20:56,320 Speaker 2: private assets because two things. A, you always hear it's 386 00:20:56,359 --> 00:20:58,359 Speaker 2: the golden age of private credit. I don't really know 387 00:20:58,400 --> 00:21:00,280 Speaker 2: what that means. Are you just hear about private all 388 00:21:00,280 --> 00:21:03,359 Speaker 2: the time, But also with private assets in general, you 389 00:21:03,359 --> 00:21:05,800 Speaker 2: hear it particularly on the private equity side, and maybe 390 00:21:05,880 --> 00:21:08,160 Speaker 2: you hear it on the VC side too. The sort 391 00:21:08,200 --> 00:21:11,320 Speaker 2: of paucity of distributions and so forth, and this idea 392 00:21:11,359 --> 00:21:14,040 Speaker 2: that they haven't been coming in questions about returns. Like 393 00:21:14,400 --> 00:21:17,960 Speaker 2: you sitting here on August thirteenth, twenty twenty five, how 394 00:21:17,960 --> 00:21:21,359 Speaker 2: are you thinking about the past results but also opportunities 395 00:21:21,359 --> 00:21:23,480 Speaker 2: set right now that exists in private. 396 00:21:24,080 --> 00:21:27,480 Speaker 7: Yeah, sure, I would say generally, I'm quite cautious on privates. 397 00:21:27,520 --> 00:21:29,919 Speaker 7: I mean, I started my career at Lehman Brothers in 398 00:21:30,240 --> 00:21:34,840 Speaker 7: one and I remember going through LBO training and you know, 399 00:21:34,880 --> 00:21:37,720 Speaker 7: you sketch out your typical LBOs maybe five six times 400 00:21:37,720 --> 00:21:41,320 Speaker 7: EBITDA with three four times leverage, and the debt pays 401 00:21:41,359 --> 00:21:44,840 Speaker 7: down and by the end of the two thousands, buyouts 402 00:21:44,920 --> 00:21:48,480 Speaker 7: or eight nine times EBITDAH. Now on average US mid 403 00:21:48,520 --> 00:21:52,800 Speaker 7: market buyouts or mid teens EBITDAH multiples, and a lot 404 00:21:52,840 --> 00:21:56,680 Speaker 7: of money's gone into privates. So we're we benefited from 405 00:21:56,760 --> 00:22:00,280 Speaker 7: leaning into privates from call it twenty ten in the 406 00:22:00,520 --> 00:22:03,800 Speaker 7: twenty twenty and we just felt kind of in twenty 407 00:22:03,800 --> 00:22:07,240 Speaker 7: twenty one that it's unlikely that investors are going to 408 00:22:07,240 --> 00:22:10,400 Speaker 7: get the return premium and I'm not on private equity now, 409 00:22:10,720 --> 00:22:13,399 Speaker 7: so like we've cut our commitment pace to. 410 00:22:13,400 --> 00:22:16,840 Speaker 4: Private equity about in half in end of twenty twenty. 411 00:22:16,520 --> 00:22:19,440 Speaker 7: One, and we've kept it around there and ticked it 412 00:22:19,520 --> 00:22:21,600 Speaker 7: up a little bit, but we're still like well below 413 00:22:21,600 --> 00:22:22,040 Speaker 7: where we. 414 00:22:21,920 --> 00:22:24,760 Speaker 4: Were deploying five years ago. We have an allocation to 415 00:22:24,800 --> 00:22:25,600 Speaker 4: private credit. 416 00:22:25,760 --> 00:22:29,879 Speaker 7: I think that's something we debate regularly, and it's maybe 417 00:22:29,960 --> 00:22:32,680 Speaker 7: four percent of our fund. I think if you look 418 00:22:32,800 --> 00:22:38,040 Speaker 7: at the unlevered yield on middle market direct lending versus 419 00:22:38,119 --> 00:22:41,920 Speaker 7: high yield or levered loans versus where it was five 420 00:22:42,000 --> 00:22:46,160 Speaker 7: years ago, I think maybe you're getting one hundred basis 421 00:22:46,160 --> 00:22:48,680 Speaker 7: points spread today versus several hundred and a few years ago. 422 00:22:48,720 --> 00:22:49,520 Speaker 4: I mean, it's just not. 423 00:22:49,520 --> 00:22:52,960 Speaker 7: Even debatable that it's less attractive than it was. And 424 00:22:53,000 --> 00:22:55,679 Speaker 7: then if you go through a recession cycle default cycle, 425 00:22:55,720 --> 00:22:57,040 Speaker 7: I think it'll really get tested. 426 00:22:57,160 --> 00:22:59,400 Speaker 4: So we're kind of ben tapping the. 427 00:22:59,320 --> 00:23:01,960 Speaker 7: Brakes on private it's the last few years, and are 428 00:23:02,320 --> 00:23:03,600 Speaker 7: pretty cautious on the outlook. 429 00:23:03,680 --> 00:23:06,040 Speaker 3: Right now, what have you been doing this year in 430 00:23:06,119 --> 00:23:10,320 Speaker 3: terms of allocation, Because the word uncertainty seems to come 431 00:23:10,400 --> 00:23:14,480 Speaker 3: up a lot in conversations nowadays. There's uncertainty over policy 432 00:23:14,920 --> 00:23:18,080 Speaker 3: and of course uncertainty over the direction of the economy. 433 00:23:18,119 --> 00:23:21,200 Speaker 3: Are you more cautious or are you I guess changing 434 00:23:21,280 --> 00:23:23,480 Speaker 3: any of your traditional allocations. 435 00:23:24,400 --> 00:23:26,639 Speaker 7: I think right now is a really tough time to 436 00:23:26,640 --> 00:23:30,200 Speaker 7: make that macro calls. I mean, you've got big budget 437 00:23:30,200 --> 00:23:34,280 Speaker 7: deficits that aren't going to come down anytime soon any 438 00:23:34,320 --> 00:23:37,960 Speaker 7: probably have FED funds coming down rapidly in the next 439 00:23:38,000 --> 00:23:40,639 Speaker 7: year with a new FED share so to want to 440 00:23:40,680 --> 00:23:44,360 Speaker 7: be like underweight equities right now, So like we're kind 441 00:23:44,359 --> 00:23:46,800 Speaker 7: of like hugging benchmarks on that wanting to be under 442 00:23:46,920 --> 00:23:48,040 Speaker 7: or overweight equities. 443 00:23:48,200 --> 00:23:49,920 Speaker 4: But it's just an expensive market. 444 00:23:50,040 --> 00:23:54,480 Speaker 7: So if you didn't have that dynamic of rates coming down, 445 00:23:54,800 --> 00:23:57,480 Speaker 7: I think you'd want to be really cautious right now. 446 00:23:57,840 --> 00:24:00,240 Speaker 7: But then given that backdrop, you kind of just have 447 00:24:00,359 --> 00:24:05,760 Speaker 7: to take the long view allocate in line with benchmarks. 448 00:24:06,040 --> 00:24:09,760 Speaker 7: And like I said, on privates, we're definitely tapping the 449 00:24:09,800 --> 00:24:14,440 Speaker 7: brakes we deploy every year because we cut our pacing. 450 00:24:14,920 --> 00:24:18,200 Speaker 7: We're still deploying, but just much less. And we're getting 451 00:24:18,600 --> 00:24:23,119 Speaker 7: more in distributions than contributions on our private equity portfolio, 452 00:24:23,160 --> 00:24:26,360 Speaker 7: which is unique and kind of a luxury. So even 453 00:24:26,400 --> 00:24:28,600 Speaker 7: though we're kind of in line with our benchmarks, I 454 00:24:28,960 --> 00:24:32,200 Speaker 7: sort of root for a dislocation because we're very well 455 00:24:32,240 --> 00:24:36,199 Speaker 7: positioned from a liquidity standpoint with the reduced private pacing. 456 00:24:36,880 --> 00:24:40,159 Speaker 2: Devin, can you talk more about the sort of the 457 00:24:40,280 --> 00:24:42,720 Speaker 2: legal status of the fund? There was an amendment to 458 00:24:42,720 --> 00:24:46,479 Speaker 2: the Alaska State Constitution that establish it. I have to 459 00:24:46,520 --> 00:24:50,000 Speaker 2: imagine that an amendment is like a very difficult it 460 00:24:50,040 --> 00:24:53,400 Speaker 2: is a very legally secure backing for you. I don't 461 00:24:53,440 --> 00:24:57,480 Speaker 2: know the Alaska constitutional process, but constitutions are hard to change. 462 00:24:57,520 --> 00:25:00,560 Speaker 2: But when you think about past your tenure, past all 463 00:25:00,600 --> 00:25:04,240 Speaker 2: of our tenures, like how legally durable is the fund 464 00:25:04,359 --> 00:25:07,200 Speaker 2: and how hard would it be? Yes, politicians are always 465 00:25:07,240 --> 00:25:09,879 Speaker 2: going to one year try to give more way to 466 00:25:09,880 --> 00:25:12,240 Speaker 2: the voters, et cetera. But how hard is it if 467 00:25:12,359 --> 00:25:16,720 Speaker 2: enterprising politicians actually wanted to change the legal strength of 468 00:25:16,720 --> 00:25:17,080 Speaker 2: the fund. 469 00:25:18,359 --> 00:25:22,119 Speaker 5: It's very difficult to change the structure of the fund 470 00:25:22,160 --> 00:25:26,720 Speaker 5: in a durable way. Statutorily, it's not that difficult. That's 471 00:25:26,720 --> 00:25:28,960 Speaker 5: a simple majority and concurrence of the governor, and you 472 00:25:29,000 --> 00:25:33,080 Speaker 5: can change statutes. The reason it took a constitutional amendment 473 00:25:33,119 --> 00:25:36,639 Speaker 5: to create the Permanent Fund is our constitution as a 474 00:25:36,680 --> 00:25:39,960 Speaker 5: prohibition on dedication of revenues, and so in order to 475 00:25:40,000 --> 00:25:43,920 Speaker 5: have a dedicated revenue pledge there had to be an amendment. 476 00:25:44,000 --> 00:25:47,640 Speaker 5: It was an overwhelming majority. It was just about two 477 00:25:47,680 --> 00:25:50,920 Speaker 5: thirds of the people of the state voted for it. Today, 478 00:25:51,160 --> 00:25:54,240 Speaker 5: the idea of shifting the fund into what I alluded 479 00:25:54,280 --> 00:25:58,080 Speaker 5: to earlier, a true endowment structure with a five percent draw, 480 00:25:58,240 --> 00:26:01,959 Speaker 5: rather than the noise that I described in the earnings reserve, 481 00:26:02,040 --> 00:26:05,080 Speaker 5: the potential of a failed draw, the potential of an overdraw, 482 00:26:05,520 --> 00:26:12,359 Speaker 5: the inflation discussion, and the intergenerational compact discussion, that we 483 00:26:12,600 --> 00:26:16,080 Speaker 5: really need a constitutional amendment to get to that point, 484 00:26:16,200 --> 00:26:20,240 Speaker 5: and it would require two thirds vote of the legislature 485 00:26:20,520 --> 00:26:23,040 Speaker 5: and then a vote of the people to ratify it. 486 00:26:23,480 --> 00:26:30,560 Speaker 5: And what quickly happens because we've had forty five years 487 00:26:30,880 --> 00:26:34,720 Speaker 5: of people getting a dividend that when they think about 488 00:26:34,720 --> 00:26:38,720 Speaker 5: the permanent fund, they don't really consider some of those 489 00:26:38,880 --> 00:26:42,040 Speaker 5: larger issues. They tend to gravitate towards Hey, I got 490 00:26:42,040 --> 00:26:43,600 Speaker 5: a check last year. What's my check going to be 491 00:26:43,640 --> 00:26:45,919 Speaker 5: next year? Where's my check? How came my check's not bigger? 492 00:26:46,119 --> 00:26:49,000 Speaker 5: How can you not following that statutory formula and I'm 493 00:26:49,000 --> 00:26:52,479 Speaker 5: not getting four grand instead of fifteen hundred. That's the 494 00:26:52,560 --> 00:26:55,480 Speaker 5: conversation that people are having, and once you dive in, 495 00:26:55,600 --> 00:26:58,840 Speaker 5: they go, oh, oh, I understand it actually is funding 496 00:26:58,880 --> 00:27:02,159 Speaker 5: my child's school, or it's actually keeping me safe on 497 00:27:02,200 --> 00:27:02,639 Speaker 5: the road. 498 00:27:02,680 --> 00:27:03,680 Speaker 6: It's doing these. 499 00:27:03,480 --> 00:27:08,200 Speaker 5: Other things at this point, and that's where that educational 500 00:27:08,280 --> 00:27:12,720 Speaker 5: process has been the challenge. We have had decent traction, 501 00:27:13,480 --> 00:27:16,280 Speaker 5: and we have a bi annual legislative session, so a 502 00:27:16,280 --> 00:27:19,159 Speaker 5: two year session where they meet one year and then 503 00:27:19,200 --> 00:27:21,359 Speaker 5: they carry forward those bills to the next. This is 504 00:27:21,400 --> 00:27:24,240 Speaker 5: the second year of that session. We had a number 505 00:27:24,320 --> 00:27:28,600 Speaker 5: of hearings last session on the concept of a constitutional amendment, 506 00:27:29,240 --> 00:27:33,879 Speaker 5: and there's I don't know, maybe it's a fifty to fifty. 507 00:27:33,960 --> 00:27:36,879 Speaker 5: Maybe it's not quite that good shot that will be 508 00:27:37,000 --> 00:27:40,240 Speaker 5: able to get the legislature to consider something like that 509 00:27:40,320 --> 00:27:45,320 Speaker 5: because you're opening discussion about the seed corn of the 510 00:27:45,400 --> 00:27:49,679 Speaker 5: state being potentially eiden that appeals to I think the 511 00:27:49,800 --> 00:27:53,640 Speaker 5: right and the left likes the idea of making sure 512 00:27:53,680 --> 00:27:57,360 Speaker 5: that you can fund your much needed project or programs 513 00:27:57,400 --> 00:27:59,840 Speaker 5: every year, and so there's kind of a balance across 514 00:27:59,880 --> 00:28:02,760 Speaker 5: the too. It's just how do you bridge that dividend question, 515 00:28:02,840 --> 00:28:04,200 Speaker 5: I think is the sticky wicket. 516 00:28:04,760 --> 00:28:05,080 Speaker 2: I don't know. 517 00:28:05,119 --> 00:28:08,480 Speaker 3: I could see school services versus down payment on a 518 00:28:08,480 --> 00:28:12,400 Speaker 3: new snowmobil y being a tough choice for some Alaskans. 519 00:28:12,560 --> 00:28:16,439 Speaker 3: But on this note, I realized this isn't necessarily your wheelhouse. 520 00:28:16,480 --> 00:28:20,360 Speaker 3: But do you've noticed any like macro economic impacts from 521 00:28:20,440 --> 00:28:25,120 Speaker 3: the dividend or maybe a broader question would be how 522 00:28:25,119 --> 00:28:29,280 Speaker 3: does it fit into Alaska's overall culture? You know, around 523 00:28:29,320 --> 00:28:32,640 Speaker 3: dividend time, do you start to see advertisements for how 524 00:28:32,640 --> 00:28:35,200 Speaker 3: to spend that extra money? How does it actually impact 525 00:28:35,240 --> 00:28:36,360 Speaker 3: Alaskan's behavior? 526 00:28:37,880 --> 00:28:38,040 Speaker 6: Oh? 527 00:28:38,040 --> 00:28:42,920 Speaker 5: Absolutely, you see, there will be sales the airlines that 528 00:28:43,160 --> 00:28:47,880 Speaker 5: sort of alask all have permanent fund dividends, sales you 529 00:28:48,000 --> 00:28:50,400 Speaker 5: have if you go buy a costco on the day 530 00:28:50,440 --> 00:28:53,200 Speaker 5: that dividends are distributed, you will be waiting in line 531 00:28:53,280 --> 00:28:57,200 Speaker 5: a long time. There is absolutely an economic impact on 532 00:28:57,240 --> 00:29:02,800 Speaker 5: the state, and similarly from the the transfer that's used 533 00:29:02,800 --> 00:29:05,680 Speaker 5: for state services that cycles within the state as well. 534 00:29:05,680 --> 00:29:09,600 Speaker 5: I mean, Alaska still has a relatively small GDP. It 535 00:29:09,760 --> 00:29:13,280 Speaker 5: vacillates based on the price of oil, but forty to 536 00:29:13,360 --> 00:29:16,880 Speaker 5: seventy billion a year, and so when you compare that 537 00:29:17,080 --> 00:29:20,560 Speaker 5: to some of the larger states, it's pretty pretty small 538 00:29:20,560 --> 00:29:25,240 Speaker 5: and fairly concentrated. Even though there's diversity from an employment perspective, 539 00:29:25,240 --> 00:29:28,120 Speaker 5: from a revenue perspective, still a lot of concentration in 540 00:29:28,200 --> 00:29:32,520 Speaker 5: oil and now investment income from the Permanent Fund, and 541 00:29:32,560 --> 00:29:39,360 Speaker 5: so it's interesting to consider if the Permanent Fund didn't exist. Alaska, 542 00:29:39,480 --> 00:29:42,480 Speaker 5: you were talking about a shrinking population, and I think 543 00:29:42,680 --> 00:29:46,080 Speaker 5: that's driven by a number of different factors, some of 544 00:29:46,120 --> 00:29:49,920 Speaker 5: which are economic opportunities maybe being more comparable to what 545 00:29:49,920 --> 00:29:52,640 Speaker 5: they are in the continental US, where at one point, 546 00:29:52,880 --> 00:29:56,440 Speaker 5: if you move to Alaska you expected to make more 547 00:29:56,480 --> 00:29:58,320 Speaker 5: than you would make in the Continental US. I have 548 00:29:58,960 --> 00:30:00,520 Speaker 5: a guy that I used to work work with, he 549 00:30:00,600 --> 00:30:04,440 Speaker 5: moved to Alaska to work in the Longest National Forest, 550 00:30:04,560 --> 00:30:07,720 Speaker 5: is a logger. He said that he made enough money 551 00:30:07,720 --> 00:30:10,240 Speaker 5: in one month to buy a brand new pickup truck. 552 00:30:10,840 --> 00:30:13,920 Speaker 5: And so you think about today and how many months 553 00:30:13,960 --> 00:30:16,120 Speaker 5: you have to work to buy a brand new pickup truck, 554 00:30:16,120 --> 00:30:18,200 Speaker 5: and he would be making, you know, let's say it's 555 00:30:18,360 --> 00:30:20,800 Speaker 5: not that nice of four wheel drive pick ups, fifty 556 00:30:20,840 --> 00:30:21,960 Speaker 5: thousand dollars. 557 00:30:21,600 --> 00:30:24,360 Speaker 6: He made that month, which wages aren't the same. 558 00:30:24,400 --> 00:30:27,160 Speaker 5: And of course logging isn't happening on that industrial scale 559 00:30:27,200 --> 00:30:29,800 Speaker 5: and Alaska anymore either, But even a slope worker is 560 00:30:29,840 --> 00:30:33,480 Speaker 5: not making fifty thousand dollars a month, and so when 561 00:30:33,560 --> 00:30:35,560 Speaker 5: you look at some of the other sectors in the 562 00:30:35,640 --> 00:30:40,520 Speaker 5: economy that there are bright spots, but certainly there's some 563 00:30:40,560 --> 00:30:41,560 Speaker 5: struggles as well. 564 00:30:57,520 --> 00:30:59,600 Speaker 2: Is it another question? I guess it's sort of looking 565 00:30:59,720 --> 00:31:03,480 Speaker 2: for and again not necessarily the wheelhouse of the fund 566 00:31:03,600 --> 00:31:06,640 Speaker 2: per se, but just thinking about the economy of Alaska. 567 00:31:06,760 --> 00:31:09,440 Speaker 2: When we were there, we heard a couple different things like, Okay, 568 00:31:09,440 --> 00:31:12,480 Speaker 2: so you're talking about the oil royalties in general, like 569 00:31:12,680 --> 00:31:15,560 Speaker 2: sort of long term decline. We heard someone talk about, well, 570 00:31:15,560 --> 00:31:18,440 Speaker 2: maybe like Alaska could one day be a hydrogen hub. 571 00:31:18,480 --> 00:31:21,880 Speaker 2: There's a lot of opportunity to harness solar and wind 572 00:31:21,960 --> 00:31:25,520 Speaker 2: and wave power to turn water into hydrogen, and that 573 00:31:25,560 --> 00:31:28,320 Speaker 2: could be a new boon for the state of Alaska. 574 00:31:28,400 --> 00:31:30,720 Speaker 2: I know there's talk maybe one day Alaska could be 575 00:31:30,840 --> 00:31:34,800 Speaker 2: an important destination for data centers because you could save 576 00:31:34,880 --> 00:31:38,480 Speaker 2: on cooling costs by just constructing them in a cold climate, 577 00:31:38,600 --> 00:31:40,720 Speaker 2: et cetera. When you think about either the state of 578 00:31:40,760 --> 00:31:43,360 Speaker 2: Alaska or the future of the Fund, do you try 579 00:31:43,400 --> 00:31:46,720 Speaker 2: to think about possible right tail upside scenarios for what 580 00:31:46,840 --> 00:31:50,320 Speaker 2: the economy of Alaska could look like ten twenty five 581 00:31:50,400 --> 00:31:51,320 Speaker 2: years down the road. 582 00:31:51,960 --> 00:31:55,320 Speaker 5: From the funds perspective, we tend to just focus on 583 00:31:55,440 --> 00:32:00,160 Speaker 5: institutional investing. From the policy Alaska perspective, those are obvious, 584 00:32:00,160 --> 00:32:00,880 Speaker 5: the all very. 585 00:32:00,720 --> 00:32:02,760 Speaker 6: Interesting things to consider. 586 00:32:02,840 --> 00:32:07,280 Speaker 5: And when you're thinking about Alaska, and again it's a 587 00:32:07,360 --> 00:32:09,920 Speaker 5: huge state, five hundred and eighty six thousand square miles, 588 00:32:09,960 --> 00:32:12,920 Speaker 5: and so you can cut Alaska in half and make 589 00:32:12,960 --> 00:32:15,840 Speaker 5: Texas the third largest state, it's huge. 590 00:32:15,880 --> 00:32:20,560 Speaker 3: It's people measures Alaska in number of Texas tech funny, yeah. 591 00:32:20,840 --> 00:32:23,360 Speaker 2: And Texas do that to the other states too, So 592 00:32:23,400 --> 00:32:26,680 Speaker 2: it's this Russian nesting doll of states lording over loading 593 00:32:26,760 --> 00:32:28,480 Speaker 2: their square miles over other states. 594 00:32:28,480 --> 00:32:33,760 Speaker 5: Anyway, keep going, but it's maybe we're a little defensive 595 00:32:33,840 --> 00:32:36,800 Speaker 5: because Alaska is on a different scale. On most maps, 596 00:32:36,800 --> 00:32:38,840 Speaker 5: we're out in the Pacific Ocean and it looks like 597 00:32:38,840 --> 00:32:42,360 Speaker 5: we're about half the size of Texas, and so oh yeah, 598 00:32:42,400 --> 00:32:43,360 Speaker 5: perhaps that's. 599 00:32:43,240 --> 00:32:45,360 Speaker 6: What drives that that emphasis. 600 00:32:45,600 --> 00:32:50,280 Speaker 5: But certainly from a resource development perspective and the open 601 00:32:50,320 --> 00:32:56,000 Speaker 5: skies or if somebody needed space, there's incredible spaces in Alaska. Obviously, 602 00:32:56,040 --> 00:32:59,840 Speaker 5: we have a lot of beautiful spaces that are protected 603 00:33:00,080 --> 00:33:04,640 Speaker 5: for both at the national and state level for future generations. 604 00:33:04,640 --> 00:33:07,640 Speaker 5: But there's a lot of land that's available for other uses, 605 00:33:07,840 --> 00:33:11,120 Speaker 5: and so as those ideas come along and they make 606 00:33:11,200 --> 00:33:15,720 Speaker 5: economic sense. I think that's the critical hurdle for Alaska 607 00:33:15,840 --> 00:33:20,920 Speaker 5: is that we have historically dreamed big and the states 608 00:33:20,960 --> 00:33:25,120 Speaker 5: had enough revenue surplus revenue to make attempts at stimulating 609 00:33:25,160 --> 00:33:28,640 Speaker 5: economic development, and it's proven to be very difficult for 610 00:33:29,200 --> 00:33:35,240 Speaker 5: government to force economic development. It has to happen more organically. 611 00:33:35,680 --> 00:33:40,640 Speaker 5: And so as people recognize the strengths that Alaska represents, 612 00:33:40,680 --> 00:33:44,200 Speaker 5: and maybe there's the distances don't make as big a 613 00:33:44,240 --> 00:33:49,960 Speaker 5: difference because of satellite communications or other technologies that make 614 00:33:50,360 --> 00:33:54,800 Speaker 5: the delivery of information seamless from other locations. And like 615 00:33:54,840 --> 00:33:57,920 Speaker 5: you said, then that with low cost energy combined with 616 00:33:58,000 --> 00:34:02,520 Speaker 5: colder climate could result in data center development trend that 617 00:34:02,640 --> 00:34:05,000 Speaker 5: I think all of it's a little we're going to 618 00:34:05,000 --> 00:34:07,640 Speaker 5: wait and see at this point be supportive from our 619 00:34:07,720 --> 00:34:10,520 Speaker 5: perspective that we're just going to focus on investing money. 620 00:34:11,560 --> 00:34:14,120 Speaker 3: Marcus, I want to go back to private credit for 621 00:34:14,200 --> 00:34:16,680 Speaker 3: one second, because I found what you were saying really 622 00:34:16,680 --> 00:34:20,440 Speaker 3: interesting that you've dialed down your exposure since twenty twenty. 623 00:34:20,719 --> 00:34:22,359 Speaker 3: You know, a lot of big funds out there, a 624 00:34:22,360 --> 00:34:24,840 Speaker 3: lot of endowments would argue that one of their competitive 625 00:34:24,840 --> 00:34:29,640 Speaker 3: advantages is that they can buy and hold illiquative investments 626 00:34:29,680 --> 00:34:33,239 Speaker 3: because they don't necessarily face the same outflow pressures as 627 00:34:33,320 --> 00:34:37,640 Speaker 3: say a mutual fund or someone like that. How do 628 00:34:37,719 --> 00:34:41,720 Speaker 3: you actually use your or deploy your I guess illiquidity 629 00:34:42,320 --> 00:34:44,879 Speaker 3: premium is that something you think about and if you're 630 00:34:44,880 --> 00:34:47,200 Speaker 3: not doing it in private credit, are you sort of 631 00:34:47,320 --> 00:34:49,280 Speaker 3: letting that competitive advantage go to waste. 632 00:34:50,239 --> 00:34:52,480 Speaker 7: I don't think of it as like an illiquidity premium 633 00:34:52,520 --> 00:34:54,640 Speaker 7: that you get. I think it's an illiquity premium that 634 00:34:54,640 --> 00:34:55,440 Speaker 7: you have to demand. 635 00:34:55,680 --> 00:34:56,399 Speaker 4: I mean, like in. 636 00:34:56,320 --> 00:34:59,319 Speaker 7: Private credit or allocation has stayed roughly the same, We've 637 00:34:59,400 --> 00:35:03,399 Speaker 7: just committed less and so across in private equity too, 638 00:35:03,760 --> 00:35:06,879 Speaker 7: and across the industry you see investors that are over 639 00:35:06,960 --> 00:35:11,000 Speaker 7: their target allocation now and they may in the future 640 00:35:11,000 --> 00:35:13,840 Speaker 7: have to reduce down their pacing. And so I feel 641 00:35:13,880 --> 00:35:18,040 Speaker 7: like if you look at private credit, the illiquidity premium 642 00:35:18,560 --> 00:35:21,000 Speaker 7: that you're getting without adjusting. 643 00:35:20,520 --> 00:35:23,320 Speaker 4: For defaults has declined in the last five years. 644 00:35:23,080 --> 00:35:26,359 Speaker 7: And so we've been less enthusiastic about it, and if 645 00:35:26,360 --> 00:35:28,440 Speaker 7: you adjust for default you may not even be getting 646 00:35:28,440 --> 00:35:31,239 Speaker 7: a premium. In private equity, in private credit today, it's 647 00:35:31,239 --> 00:35:32,080 Speaker 7: like a debate like. 648 00:35:32,080 --> 00:35:34,640 Speaker 4: Are you getting an appropriate illoquity premium? 649 00:35:34,680 --> 00:35:35,960 Speaker 7: And so I think of it as kind of like 650 00:35:36,080 --> 00:35:40,759 Speaker 7: keeping our powder dry for a different environment where there 651 00:35:40,880 --> 00:35:44,719 Speaker 7: is real opportunistic situations that you can demand a very 652 00:35:44,760 --> 00:35:47,680 Speaker 7: high return premium for locking up your money for ten years. 653 00:35:47,680 --> 00:35:48,480 Speaker 4: I don't think it's like. 654 00:35:49,600 --> 00:35:52,160 Speaker 7: I think it's a market thing that in different markets 655 00:35:52,280 --> 00:35:54,799 Speaker 7: you may not even get an ill liquidity premium, and 656 00:35:54,840 --> 00:35:58,360 Speaker 7: we may be close to that now, and in those situations, 657 00:35:58,920 --> 00:36:01,920 Speaker 7: liquidity should be value. And I think liquidity should be 658 00:36:02,000 --> 00:36:05,480 Speaker 7: valued now, whereas ten years ago it was a real 659 00:36:05,560 --> 00:36:09,640 Speaker 7: compelling environment for harvesting and aliquidity premium. 660 00:36:09,760 --> 00:36:11,880 Speaker 3: Yeah, you kind of touched on this earlier, the idea 661 00:36:11,880 --> 00:36:14,960 Speaker 3: that you're hoping for some sort of dislocation to take 662 00:36:14,960 --> 00:36:17,760 Speaker 3: advantage of, which we're journalists. We like it when stuff 663 00:36:17,840 --> 00:36:20,520 Speaker 3: happens and we have a lot to talk and write about. 664 00:36:20,840 --> 00:36:26,040 Speaker 3: But what dislocation are you sort of envisioning here, Well. 665 00:36:25,920 --> 00:36:27,520 Speaker 4: It depends on the asset class. 666 00:36:27,560 --> 00:36:29,880 Speaker 7: I mean, in fixed income, for example, we've had like 667 00:36:30,120 --> 00:36:32,680 Speaker 7: very tight spreads for a very long time, and our 668 00:36:32,680 --> 00:36:35,919 Speaker 7: fixed income team is kind of just trying to stay 669 00:36:35,920 --> 00:36:40,000 Speaker 7: out of trouble. If you look at a month like April, 670 00:36:40,680 --> 00:36:44,120 Speaker 7: the first two days the market was down over ten percent. 671 00:36:44,840 --> 00:36:48,880 Speaker 7: Most pension funds and endowments rebounced monthly. Because our benchmarks 672 00:36:48,920 --> 00:36:51,920 Speaker 7: rebounced monthly, we've decided that we just are going to 673 00:36:51,960 --> 00:36:56,040 Speaker 7: ignore that, and so we like bought the dip graduations. Yeah, 674 00:36:56,040 --> 00:36:58,520 Speaker 7: and then it was so it was so brief that 675 00:36:58,880 --> 00:37:01,359 Speaker 7: it's a lip in the perform roaments. But I mean, 676 00:37:01,480 --> 00:37:06,600 Speaker 7: I think that there's could be trouble lurking and private equity, 677 00:37:06,680 --> 00:37:09,759 Speaker 7: there could be trouble lurking commercial real estate. I don't 678 00:37:09,800 --> 00:37:11,839 Speaker 7: know on private credit. I'm not like making a call 679 00:37:11,920 --> 00:37:14,200 Speaker 7: that it's headed for disaster. I just don't think you're 680 00:37:14,200 --> 00:37:17,160 Speaker 7: getting a real compelling premium for lock hamp your money. 681 00:37:17,360 --> 00:37:19,640 Speaker 7: But in some of those areas that could get dislocated, 682 00:37:19,680 --> 00:37:22,520 Speaker 7: like private equity or commercial real estate, like we want 683 00:37:22,560 --> 00:37:26,680 Speaker 7: to be the buyer with deep pockets in a dislocation. 684 00:37:27,040 --> 00:37:28,799 Speaker 7: And when you look around the industry people that are 685 00:37:28,840 --> 00:37:32,399 Speaker 7: over allocated to private equity, I think we'll find that 686 00:37:32,440 --> 00:37:34,520 Speaker 7: they don't have that luxury, and like we want to 687 00:37:34,520 --> 00:37:36,040 Speaker 7: have that luxury. 688 00:37:35,840 --> 00:37:37,160 Speaker 4: You know, and a cycle will come. 689 00:37:37,360 --> 00:37:39,680 Speaker 7: It may not be, it probably will not be next 690 00:37:39,760 --> 00:37:42,120 Speaker 7: year with rates coming down, or maybe it will be 691 00:37:42,120 --> 00:37:44,400 Speaker 7: because no one thinks it will. 692 00:37:44,560 --> 00:37:46,320 Speaker 2: I have a real short question, then a real question. 693 00:37:46,440 --> 00:37:49,880 Speaker 2: The short question is if there's some manager, all manager 694 00:37:49,920 --> 00:37:52,200 Speaker 2: of any sort, do they have to fly to Juno 695 00:37:52,280 --> 00:37:54,040 Speaker 2: and be you or do you go to the lower 696 00:37:54,080 --> 00:37:56,520 Speaker 2: forty eight or how do those introductions work? 697 00:37:57,160 --> 00:37:57,359 Speaker 4: Yeah. 698 00:37:57,400 --> 00:37:59,640 Speaker 7: When I started here about ten years ago, we were 699 00:37:59,719 --> 00:38:03,840 Speaker 7: really building out private markets, and we had this idea 700 00:38:04,239 --> 00:38:06,600 Speaker 7: that we should kind of haze managers and not only 701 00:38:06,640 --> 00:38:09,279 Speaker 7: should they come out, that should come out in January and. 702 00:38:09,800 --> 00:38:13,080 Speaker 2: Do a glacier cruise with high high waves. 703 00:38:13,120 --> 00:38:15,959 Speaker 7: Anyway, when we started trying to get into the real 704 00:38:16,000 --> 00:38:18,239 Speaker 7: premiere venture funds and stuff, we realized that was not 705 00:38:18,280 --> 00:38:22,400 Speaker 7: a good model. So we've been using our Alaska air minds. 706 00:38:22,719 --> 00:38:24,840 Speaker 2: Okay, real question. This is the last thing for me. 707 00:38:24,960 --> 00:38:27,040 Speaker 2: So it occurred to me and I bring this up 708 00:38:27,080 --> 00:38:30,800 Speaker 2: because of the mention of logging and your mention of oil. 709 00:38:30,880 --> 00:38:36,920 Speaker 2: Earlier famously, David Swinton at Yale made timber allocation a 710 00:38:37,000 --> 00:38:38,960 Speaker 2: core part of his portfolio, and there's all this thinking 711 00:38:39,000 --> 00:38:43,520 Speaker 2: that like natural resource environment investments like that could play 712 00:38:43,600 --> 00:38:46,399 Speaker 2: a good diversifying role that they were sort of acyclical 713 00:38:46,520 --> 00:38:51,280 Speaker 2: in certain ways, and they're very natural indie endowment setting. 714 00:38:51,840 --> 00:38:55,240 Speaker 2: You're in a resource extraction state, and so I'm curious 715 00:38:55,239 --> 00:38:57,919 Speaker 2: if you have any thoughts today, setting aside the point 716 00:38:57,920 --> 00:39:00,960 Speaker 2: you made about oil and maybe was or not enough 717 00:39:01,000 --> 00:39:03,560 Speaker 2: capital exposed to it in twenty twenty one, whether you 718 00:39:03,680 --> 00:39:07,120 Speaker 2: have any thoughts about in the modern era, do resource 719 00:39:07,200 --> 00:39:10,279 Speaker 2: industries can they still play that role in a long 720 00:39:10,360 --> 00:39:14,000 Speaker 2: term portfolio where they deliver returns that aren't necessarily in 721 00:39:14,040 --> 00:39:16,360 Speaker 2: line with what like quote risky assets are doing in 722 00:39:16,360 --> 00:39:16,919 Speaker 2: a given year. 723 00:39:17,600 --> 00:39:18,319 Speaker 4: Oh, I think so. 724 00:39:18,440 --> 00:39:21,360 Speaker 7: I think commodities and resources have always been an interesting 725 00:39:21,360 --> 00:39:24,240 Speaker 7: area to look but like one of my favorite investment 726 00:39:24,320 --> 00:39:27,560 Speaker 7: quotes is Barton Biggs quote that there's no investment idea 727 00:39:27,600 --> 00:39:30,200 Speaker 7: that's so good that too much capital can destroy it, 728 00:39:30,640 --> 00:39:31,560 Speaker 7: ruin it for everyone. 729 00:39:31,960 --> 00:39:33,320 Speaker 4: And that was definitely the case. 730 00:39:33,400 --> 00:39:38,000 Speaker 7: Like once David Swinson, yeah, publicly that anything. Usually a 731 00:39:38,040 --> 00:39:40,360 Speaker 7: lot of people followed him, and so Timber kind of 732 00:39:40,360 --> 00:39:44,440 Speaker 7: got uninteresting. But I mean, I think resource development, mining 733 00:39:44,520 --> 00:39:47,919 Speaker 7: are areas that have been like underinvested in the United 734 00:39:47,960 --> 00:39:50,160 Speaker 7: States at least the last decade. So, I mean that's 735 00:39:49,920 --> 00:39:52,080 Speaker 7: a that's a real interesting area for some of our 736 00:39:52,080 --> 00:39:53,440 Speaker 7: private market managers. 737 00:39:53,719 --> 00:39:56,280 Speaker 3: I have one more question, which is I am looking 738 00:39:56,320 --> 00:39:58,920 Speaker 3: at the White House website right now. I'm looking at 739 00:39:58,960 --> 00:40:01,800 Speaker 3: a page that says up plan for establishing a United 740 00:40:01,800 --> 00:40:04,840 Speaker 3: States Sovereign Wealth Fund, And as we discussed in the beginning, 741 00:40:04,880 --> 00:40:07,440 Speaker 3: who knows if that's actually going to happen, but certainly 742 00:40:07,480 --> 00:40:11,080 Speaker 3: there are some discussions around it. If the US at 743 00:40:11,080 --> 00:40:14,560 Speaker 3: a federal level were to establish a sovereign Wealth fund 744 00:40:14,640 --> 00:40:19,319 Speaker 3: and SWF, what advice would you have for something at 745 00:40:19,360 --> 00:40:19,840 Speaker 3: that level. 746 00:40:21,440 --> 00:40:23,920 Speaker 7: Well, I mean, I think setting up something with like 747 00:40:24,080 --> 00:40:29,359 Speaker 7: clear rules based investment policy makes a lot of sense. 748 00:40:29,360 --> 00:40:32,719 Speaker 7: I mean, anytime you're investing public funds, like one of 749 00:40:32,719 --> 00:40:35,960 Speaker 7: the most important things to do is to get the 750 00:40:35,960 --> 00:40:39,680 Speaker 7: trust of the citizenry, your stakeholders, and how you're making 751 00:40:39,719 --> 00:40:43,080 Speaker 7: investment decisions, how you do due diligence, how you build 752 00:40:43,120 --> 00:40:47,360 Speaker 7: a portfolio. So I would encourage them to think about 753 00:40:47,400 --> 00:40:49,919 Speaker 7: the fact that it will likely live beyond the current 754 00:40:49,920 --> 00:40:53,920 Speaker 7: administration the future administrations, and just have real thoughtful governance, 755 00:40:54,120 --> 00:40:55,879 Speaker 7: investment committee process, things like that. 756 00:40:55,960 --> 00:40:57,160 Speaker 4: I don't know if you have anything. 757 00:40:56,920 --> 00:40:59,680 Speaker 6: To haven those were my thoughts as well. 758 00:40:59,760 --> 00:41:04,480 Speaker 5: I'm later on it's when the idea initially came out 759 00:41:04,640 --> 00:41:07,279 Speaker 5: just from a personal perspective. I had a little bit 760 00:41:07,320 --> 00:41:10,800 Speaker 5: of a hard time understanding why we would be doing 761 00:41:10,840 --> 00:41:15,160 Speaker 5: that when we're in a recurring fiscal deficit situation. The 762 00:41:15,239 --> 00:41:18,560 Speaker 5: reason that most sovereign wealth funds exist, or maybe all, 763 00:41:19,360 --> 00:41:24,840 Speaker 5: is that there's windfall revenue that shows up that people, 764 00:41:25,480 --> 00:41:28,560 Speaker 5: like I said earlier, have a vision of providing for 765 00:41:28,680 --> 00:41:33,480 Speaker 5: their residents in perpetuity from a one time revenue source, 766 00:41:34,000 --> 00:41:36,520 Speaker 5: and so if there were something along that line that 767 00:41:36,600 --> 00:41:39,000 Speaker 5: showed up at the national level, it might make some sense. 768 00:41:39,040 --> 00:41:42,400 Speaker 5: But you would, I think hope that you had a 769 00:41:42,440 --> 00:41:45,719 Speaker 5: balanced budget. You would have some methodology for why you 770 00:41:45,719 --> 00:41:49,800 Speaker 5: would be pursuing creating a sovereign wealth fund despite having 771 00:41:50,120 --> 00:41:51,600 Speaker 5: a budget that was in imbalance. 772 00:41:51,840 --> 00:41:54,040 Speaker 2: Yeah, it definitely seems though. All around the world, if 773 00:41:54,040 --> 00:41:56,960 Speaker 2: you look at sovereign wealth funds, they frequently associated with 774 00:41:57,160 --> 00:42:00,680 Speaker 2: oil oil and frequently associated with economy that are too 775 00:42:00,719 --> 00:42:03,359 Speaker 2: small for the money to be deployed in a short 776 00:42:03,400 --> 00:42:06,440 Speaker 2: period of time without creating a lot of waste inflation. Anyway, 777 00:42:06,760 --> 00:42:11,040 Speaker 2: fascinating conversation. Devi and Marcus. Thank you both so much 778 00:42:11,080 --> 00:42:13,360 Speaker 2: for coming on odd lots thinking a conversation A lot 779 00:42:13,400 --> 00:42:15,719 Speaker 2: of people are very curious about and I really appreciate 780 00:42:15,719 --> 00:42:16,720 Speaker 2: you both taking your time. 781 00:42:16,840 --> 00:42:17,320 Speaker 4: Yeah, thank you. 782 00:42:18,040 --> 00:42:18,320 Speaker 6: Thanks. 783 00:42:18,400 --> 00:42:20,319 Speaker 5: I forgot to mention I saw a bear on the 784 00:42:20,320 --> 00:42:21,320 Speaker 5: way to work this morning. 785 00:42:23,600 --> 00:42:25,799 Speaker 2: Black bear, Just a black bear. 786 00:42:26,880 --> 00:42:29,320 Speaker 3: We have those in Connecticut exactly. 787 00:42:29,719 --> 00:42:33,000 Speaker 5: I didn't see when yesterday where on my mom's roof, 788 00:42:33,200 --> 00:42:35,680 Speaker 5: which is that's unusual. 789 00:42:36,120 --> 00:42:51,120 Speaker 2: Yeah, Tracy, I love that conversation. First of all, I'm 790 00:42:51,120 --> 00:42:54,960 Speaker 2: glad we did that after after we had returned from Alaska, 791 00:42:55,000 --> 00:42:58,120 Speaker 2: because I just felt like understanding just what a distinct 792 00:42:58,280 --> 00:43:01,719 Speaker 2: economy is Alaska is, and the specific needs of the 793 00:43:01,719 --> 00:43:04,880 Speaker 2: Alaskan economy, et cetera, and the sort of weirdness and 794 00:43:04,920 --> 00:43:08,200 Speaker 2: the exposure to booms and busts, and whether an economy 795 00:43:08,320 --> 00:43:11,239 Speaker 2: that farflung can even like support itself, it gives me 796 00:43:11,280 --> 00:43:14,200 Speaker 2: a deeper understanding of like why a state would have 797 00:43:14,239 --> 00:43:16,399 Speaker 2: the equivalent of a sovereign wealth fund, or why would 798 00:43:16,440 --> 00:43:19,880 Speaker 2: have the equivalent of like a small like little universal 799 00:43:19,880 --> 00:43:20,520 Speaker 2: basic income. 800 00:43:20,680 --> 00:43:20,960 Speaker 4: Yeah. 801 00:43:20,960 --> 00:43:23,759 Speaker 3: Well, on that note, I did think it was interesting 802 00:43:23,960 --> 00:43:26,439 Speaker 3: when we asked about what would their advice be for 803 00:43:26,520 --> 00:43:31,120 Speaker 3: a federal sovereign wealth fund, and they said something rules based, Yes, 804 00:43:31,160 --> 00:43:34,000 Speaker 3: where you you know, you stick to a certain payout 805 00:43:34,120 --> 00:43:38,560 Speaker 3: formula in order to insulate the fund from political whims 806 00:43:38,719 --> 00:43:41,800 Speaker 3: which change on a sort of mid term basis. I 807 00:43:42,760 --> 00:43:45,239 Speaker 3: thought that was really interesting, and it also reminded me 808 00:43:45,520 --> 00:43:49,520 Speaker 3: actually of the conversations we had with Claudia sam about 809 00:43:49,520 --> 00:43:51,920 Speaker 3: the Psalm rule and the idea that like, one of 810 00:43:51,920 --> 00:43:55,279 Speaker 3: the reasons you want these rules based economic formulas is 811 00:43:55,320 --> 00:43:58,719 Speaker 3: in order to her stimulus formulas is to insulate them 812 00:43:58,760 --> 00:43:59,640 Speaker 3: from political rust. 813 00:43:59,760 --> 00:44:00,000 Speaker 1: Yeah. 814 00:44:00,040 --> 00:44:02,520 Speaker 3: I thought that was interesting. I also thought, I mean, 815 00:44:02,560 --> 00:44:05,440 Speaker 3: it sounds like being a portfolio manager at the Alaska 816 00:44:05,480 --> 00:44:07,640 Speaker 3: Fund would be like a nice job. 817 00:44:07,760 --> 00:44:11,000 Speaker 2: I thought, yeah, but would you but the Alaska part? 818 00:44:11,000 --> 00:44:11,799 Speaker 2: Would you take it? 819 00:44:13,000 --> 00:44:16,640 Speaker 3: I haven't done an Alaskan winter, so I highly suspect 820 00:44:16,880 --> 00:44:20,360 Speaker 3: my opinions of living in the state would change drastically 821 00:44:20,400 --> 00:44:22,600 Speaker 3: if I was there in January versus August. 822 00:44:22,880 --> 00:44:24,960 Speaker 2: Can I say something that is not meant to be 823 00:44:25,120 --> 00:44:27,920 Speaker 2: insulting to anyone who lives there or any of the 824 00:44:27,960 --> 00:44:32,279 Speaker 2: wonderful guests that we've had, is certainly not meant to 825 00:44:32,280 --> 00:44:34,960 Speaker 2: be insulting to anyone. Yeah, who anyone who lives in Alaska. 826 00:44:35,120 --> 00:44:37,640 Speaker 2: There are a lot of bars and anchorage. There are 827 00:44:37,680 --> 00:44:40,080 Speaker 2: a lot of dive bars. I feel like there's a 828 00:44:40,200 --> 00:44:43,799 Speaker 2: reason I do not Yes that too. I suspect that 829 00:44:43,840 --> 00:44:47,160 Speaker 2: there is a link between all those bars in like 830 00:44:47,560 --> 00:44:50,120 Speaker 2: eight months where the sun comes up at like eleven 831 00:44:50,320 --> 00:44:51,960 Speaker 2: am and goes down at four peu. 832 00:44:52,080 --> 00:44:52,719 Speaker 4: It's a long winter. 833 00:44:52,760 --> 00:44:53,600 Speaker 3: You got to go somewhere. 834 00:44:53,640 --> 00:44:56,040 Speaker 2: You gotta do something that seems like pretty tough on 835 00:44:56,160 --> 00:44:58,520 Speaker 2: the human condition. Two other things that I thought were interesting, 836 00:44:58,560 --> 00:45:00,719 Speaker 2: So on that point about whether or nation sovereign wealth 837 00:45:00,760 --> 00:45:03,080 Speaker 2: fund makes sense, I do agree with, like this basic idea, 838 00:45:03,160 --> 00:45:05,560 Speaker 2: like we're it's most logical is if you have this 839 00:45:05,640 --> 00:45:09,680 Speaker 2: big windfall of money and you can't put it all 840 00:45:09,719 --> 00:45:12,520 Speaker 2: into the economy right now because you act the capacity right, 841 00:45:12,640 --> 00:45:15,279 Speaker 2: you create inflation or whatever. I think that we don't 842 00:45:15,320 --> 00:45:17,600 Speaker 2: have anything like that condition. We don't have big some 843 00:45:17,680 --> 00:45:21,799 Speaker 2: big windfall of money, et cetera. And then the other 844 00:45:21,880 --> 00:45:24,080 Speaker 2: thing too is I like getting their takeout just asset 845 00:45:24,120 --> 00:45:26,680 Speaker 2: markets right now and private credit, and it's just that, yeah, 846 00:45:26,800 --> 00:45:28,880 Speaker 2: this is not as maybe it's not the golden. 847 00:45:28,600 --> 00:45:29,239 Speaker 6: Age right now? 848 00:45:30,520 --> 00:45:32,279 Speaker 3: All right, shall we leave it there, Let's leave it there. 849 00:45:32,400 --> 00:45:35,000 Speaker 3: This has been another episode of the Authots podcast. I'm 850 00:45:35,040 --> 00:45:38,200 Speaker 3: Tracy Alloway. You can follow me at Tracy Alloway. 851 00:45:37,880 --> 00:45:40,840 Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart. 852 00:45:41,160 --> 00:45:44,640 Speaker 2: You can follow our producers Kerman Rodriguez at Kerman armand Dash, 853 00:45:44,680 --> 00:45:48,000 Speaker 2: Ob Bennett at Dashbod and Kelbrooks and Kilbrooks. For more 854 00:45:48,040 --> 00:45:50,919 Speaker 2: Odd Lots content, go to Bloomberg dot com slash odd Lots, 855 00:45:50,920 --> 00:45:53,480 Speaker 2: where we have a daily newsletter and all of our episodes, 856 00:45:53,719 --> 00:45:55,720 Speaker 2: and you could chat about all of these topics twenty 857 00:45:55,719 --> 00:45:59,719 Speaker 2: four to seven in our discord discord dot gg slash odlines. 858 00:46:00,040 --> 00:46:02,440 Speaker 3: And if you enjoy odd Lots, if you like it 859 00:46:02,520 --> 00:46:05,160 Speaker 3: when we travel to far flung states, then please leave 860 00:46:05,239 --> 00:46:08,720 Speaker 3: us a positive review on your favorite podcast platform. And remember, 861 00:46:08,760 --> 00:46:11,359 Speaker 3: if you are a Bloomberg subscriber, you can listen to 862 00:46:11,520 --> 00:46:14,480 Speaker 3: all of our episodes absolutely add free. All you need 863 00:46:14,520 --> 00:46:17,120 Speaker 3: to do is find the Bloomberg channel on Apple Podcasts 864 00:46:17,120 --> 00:46:35,360 Speaker 3: and follow the instructions there. Thanks for listening.